Even as economies around the world pursue economic growth, these efforts cannot be isolated from a focus on sustainability. Achieving sustainable growth will open the doors to not just unprecedented, future-forward opportunities, but also large-scale risks and challenges that demand innovative solutions.
These include a range of climate and environmental risks that are threatening everyday life for populations across Association of Southeast Asian Nations (ASEAN) member states. Due to the region’s fast-growing, dense urban areas and proximity to coastal areas, ASEAN is particularly vulnerable to the effects of climate change—from devastating cyclones and floods, to unrelenting heatwaves and droughts.
The recent past is replete with examples of how ASEAN’s economies will suffer. In 2024, for example, the Philippines was hit by six typhoons within a span of 30 days. This late typhoon season affected more than 13 million people in the country, greatly straining the country’s fiscal position.
Another less talked about implication of the change in weather patterns is on the region’s food security. As floods and droughts become more frequent and severe in nature, key food producing regions – such as the Mekong Delta region, a major source of rice – will find themselves struggling with crop destruction and less productive harvests.
Frequent flooding could also cause a range of other issues, such as heightened costs in terms of healthcare and damaged infrastructure, which are also contributing to a growing insurance gap in the region. All in all, if climate change isn’t sufficiently addressed, ASEAN could face 11% of GDP losses by 2100.
Exhibit 1: The disaster-related insurance gap in Asia is growing
Source: Swiss Re, in Nikkei Asia
These costs emphasise the imperative for the region to push forward a new paradigm of growth that prioritises low-carbon, resource efficient and socially inclusive solutions.
Going Green: Path to Economic Growth
Analyses have shown that transitioning to a green economy isn’t just about creating costs but also serious economic growth opportunities. Projections by the Boston Consulting Group suggests that pursuing carbon neutrality can add US$3 trillion to US$5.3 trillion to ASEAN’s GDP by 2050. The push could also attract US$3.7 trillion to US$6.7 trillion in green investments, generating between 49 million and 66 million additional jobs in ASEAN by the middle of the century.
There are also significant benefits in terms of health outcomes, as carbon neutrality can lead to improvements in air and water quality. Air and water pollution are associated with higher risks of heart and lung disease, water-borne diseases, cancer and even developmental delays in children.
Biodiversity is also essential for maintaining healthy ecosystems, ensuring the resilience of food production systems and climate regulation. Consider the mangrove forests in parts of ASEAN, which not only provide a buffer against flooding and erosion but also act as essential habitats for hundreds of plant and animal species. Supporting the long-term maintenance of a biodiverse landscape is thus essential for accessing raw materials for life-saving medicines and preserving food webs.
ASEAN’s Road to the Green Economy
Understanding the myriad benefits that a green economy brings, ASEAN has taken several steps to accelerate its green transition.
To respond to biodiversity loss in the region, ASEAN member states established the ASEAN Centre for Biodiversity in 2005 to control biodiversity loss in the region. The centre has launched the ASEAN Green Initiative, aiming to plant at least 10 million native trees across the 10 member states in a span of 10 years, illustrating their commitment to the UN Decade on Ecosystem Restoration.
More recently, the Centre spearheaded the launch of the ASEAN Biodiversity Plan that sets out priorities for a number of goals to achieve by 2050, including the restoration of 30% of degraded ecosystems and information sharing between member states. In the long run, these efforts will pave the way towards better management of the region’s diverse ecosystems and healthier environments for humans.
Exhibit 2: The goals of the ASEAN Green Initiative
Source: ASEAN
Another initiative is ASEAN Green Future, a multi-year research project launched in 2021, involving the UN Sustainable Development Solutions Network, ClimateWorks Centre, and nine country teams from leading universities and think tanks across Southeast Asia. The project comprises two phases and aims to equip a generation of climate change and decarbonisation researchers, providing them with quantitative and qualitative climate policy analysis to chart a net-zero future for ASEAN.
The project could also offer key insights for businesses by providing essential data and technical advice to assist them as they plan to decarbonise their own operations. Governments may also leverage these data points to set out regulatory frameworks to ensure the effectiveness of any future climate or emissions-focused action plans.
Given the high costs of decarbonisation technologies and transitions, access to financing will be crucial. The ASEAN Catalytic Green Finance Facility (ACGF) was launched in April 2019 by the ASEAN Infrastructure Fund to accelerate green infrastructure investments in Southeast Asia. The ACGF would provide governments with access to over US$1 billion in loans to de-risk commercially-viable green infrastructure projects and make them more attractive to private capital investors.
Exhibit 3: How much funding will be needed to achieve net-zero in ASEAN?
Source: World Economic Forum
ASEAN Economic Ministers also endorsed a visionary ASEAN Strategy for Carbon Neutrality in August 2023, which seeks to further ASEAN’s competitiveness on the global stage via four key outcomes:
- the development of regional green value chains to unlock ASEAN’s manufacturing and export potential
- fostering growth of green technologies by enabling exchange of green electricity, products, and feedstocks
- developing globally credible standards to become a top destination for foreign capital flow
- investing and developing its human capital of green talent to drive the climate transition.
Acknowledged by ASEAN leaders in September 2023, the strategy has been presented to ASEAN member states with policies being developed to collaborate together on unlocking the immense socioeconomic benefits of a carbon-neutral future.
ASEAN’s Search for Carbon Neutrality
ASEAN is tapping into eight strategies to go carbon neutral. They include:
- Collaboration to develop policies and regulations to boost the greening of manufacturing value chains; drive acceptability of locally produced biofuels and sustainable aviation fuel both regionally and globally; and support the development of carbon capture, utilisation, and storage infrastructure.
- Upgrade of the ASEAN Trade in Goods Agreement to accommodate the inclusion of circular product types.
- Standardisation of cross-border infrastructure to enable interoperability of electric, hydrogen, and flex-fuel vehicles, while allowing power trading among ASEAN member states.
- Development of a regional measurement, reporting, and verification framework to enable seamless movement of high-quality carbon credits regionally and globally.
- Development of globally accepted credible frameworks for climate reporting with the development of a consolidated database to track and collate GHG emissions.
- Promoting the deployment of ASEAN green/sustainability linked bonds and sukuk standards, while supporting and incentivising green fund managers and encouraging the development of local funds.
- Harmonising standards around green skills qualifications to facilitate the movement of natural persons to close talent supply/demand gaps.
- Facilitating best practices sharing on development of sustainable infrastructure and the deployment of smart city technologies such as waste management.
The private sector has much to gain from participating in ASEAN’s transition to a green economy. Other than leveraging on the next phase of growth in the region, businesses can participate in cross-border partnerships, knowledge-sharing initiatives, and joint ventures to scale their own climate action efforts.
Financial institutions such as the Asian Development Bank are actively working with ASEAN through the provision of financing and knowledge sharing. The bank is catalysing green and innovative financing solutions through its Southeast Asia Green Finance Hub and helping develop and finance bankable ocean health projects through its Blue Southeast Asia Finance Hub.
Going forward, the region needs to develop a framework that fosters collaboration between public and private leaders, and the development of green financing and talent to realise any potential policy interventions. Proper governance will be needed to ensure that action plans under the framework are clearly defined, with specific tasks and initiatives. A green economy in ASEAN is no more an abstract concept, but a north star, demanding collective action.
This article was written by Smartkarma, in collaboration with ASEAN Exchanges.
